Gold Price Extends Losses as Higher U.S. Rates Loom

New York (May 1)  Gold prices extended their losses Friday as expectations that U.S. interest rates will rise this year prompted traders to unwind bullish bets on the precious metal.

Gold for June, the most actively traded contract, was down $10.30, or 0.9%, at $1,172.10 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold losses extended follow-through selling from Thursday, when the market suffered its biggest one-day drop in nearly two months after the Labor Department said the number of Americans applying for unemployment benefits last week fell to its lowest level in 15 years, indicating stronger job growth.

The data came one day after the Fed gave no new signals on the timing of an increase in interest rates, attributing weak first-quarter growth rates to transitory factors such as severe winter weather. Some investors had bought gold in the days before the Fed’s meeting on expectations that the recent spate of weak economic data would lead the central bank to send a dovish message.

Precious metals are typically safe-haven assets that investors turn to in troubled times. They have lost their luster as the U.S. continues its long, slow, uneven recovery from the financial crisis. Gold has lost more than 9% since late January as the economic picture has generally continued to improve.
”Gold is starting to break down. The anticipation of rates going up by the end of the year is still in play,” said Dan Pavilonis, a senior market strategist at futures brokerage R.J. O’Brien in Chicago. “That signals an improving economy.”

Analysts said renewed strength in the dollar and a reading on China manufacturing activity that indicated continued expansion were also weighing on gold.

”Gold sellers continue this first day of the new trading month to avoid long gold positions,” RBC Wealth Management analyst George Gero said in a note.

Source: WSJ